I read earlier this year Richard Rumelt’s book Good Strategy Bad Strategy, much acclaimed when it was published in 2011. And you can see why: it is lucid, well-writtem, and largely free of jargon, which already marks it out from the average business book. It also has a clear view of what strategy is (and what it is not), which is welcome, given how much the word is abused. And the business stories he tells illuminate his argument.

Rumelt is entertaining on the differences between bad strategy and good strategy – and I’ll come back to the bad strategy later. Good strategy, he says, is composed of a kernel of three elements (p77):

A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the complexity by identifying the critical aspects of the situations.

A guiding policy for dealing with the challenge.

A set of coherent actions that are designed to carry out the guiding policy.

In particular, I found his advice on diagnosis valuable. A good diagnosis “should replace the overwhelming complexity of reality with a simpler story, a story that calls attention to its crucial aspects.” This is, in effect, a sense making exercise. And a good strategic diagnosis does a second critical thing: “it also defines a domain of action.” Good strategy can then be built on a diagnosis that points to areas of leverage over outcomes. (more…)

Business risk is usually an exercise in corporate power. But your own business assumptions are about to become a risk in their own right.

A few months ago, I wrote about risk – suggesting that the ‘discipline’ of risk management tended to focus on risks which were (a) understood and (b) for which probabilities could be estimated, and that this led to far too narrow a view of risk. In particular, this meant that companies were usually very poor at assessing their blindspots. This second post has taken longer to write than I expected, but in this one I’m going to look at the factors which mean that companies tend to remain blinded by their blindspots.

Now that the froth from the iPad launch has blown past, it’s worth stepping back a bit. For me, the most telling comments were not the ones which talked about functionality, but those which looked at what the iPad proposition told us about the state of the device and app market. Which is this: the computer technology market is now moving out of its technology-led phase.

A moment of theory might help. I’m quite influenced by the work of the economic historian Carlota Perez, who’s tracked five long phases, or surges, of technology innovation, going back to 1771. Each phase runs for 50-60 years and follows a common pattern (there’s more detail in the diagram below). There’s an ‘installation’ phase, in which the new technology platform spreads in visibility and usage (device penetration increases, underlying infrastructure is developed). There’s a bubble and a crash, in which investors get over-excited about the prospects. And then there’s a deployment phase, in which the applications associated with the technology platform deepen and broaden, and the underlying impacts on society become more profound. The ICT surge started in 1971, with the invention of the microprocessor. We’ve finished the installation phase, we’ve had the crash (dot.com, not global financial crash, though the two may be linked), and now we’re several years into the deployment phase. The iPad launch was another confirming sign of this.

Regular readers will know that I’m sceptical (see previous posts about Heathrow’s third runway here and here) about the long-term predictions that aviation demand will keep on growing – most of the main trends are pointing the wrong way (oil prices, restrictions on carbon emissions, competing technologies, government need for tax revenues from undertaxed sectors, along with changes in social values). So far, certainly in the UK, public policy hasn’t caught up with this. But with the news that Ryanair has noisily cancelled its order from Boeing for 200 planes, perhaps the industry has.

Donella (‘Dana’) Meadows was almost certainly the most influential systems thinker of her generation. At barely thirty, she was the lead author of ‘Limits to Growth‘ and she remained an influential voice in the sustainability movement until her relatively early death in 2001 – which for me at least recalled an Adrian Mitchell couplet, ‘And God killed Aneurin Bevan/ And let Harold Wilson survive’.

The manuscript of ‘Thinking in systems‘ has been around in draft since the early ’90s, but never completed. Now her colleague Diana Wright has edited it for publication. In the circumstances, it ought to be something of a publishing event, even if a niche one. It is, I’d say, the best single introduction to systems work that is available, especially for non-specialists. But the book seems to have surfaced with little fanfare, and barely a review.

The excitement over the launch of the iPhone in Europe gives me a reason – or at least an excuse – to mention an interesting interview on strategic opportunity with Richard Rumelt in McKinsey Quarterly (free but requires registration) a couple of months ago. Rumelt – one of the most influential academics in the strategy field – suggested that most businesses confused planning with strategy, and that there was a big gap between most executives’ strategic perceptions of their markets and their behaviour. But not at Apple.